Running a business can be tricky. Even if you are a savvy entrepreneur, at times, you will find yourself with a cash shortage to cover expenses. When this happens, you have two financing options you can consider: merchant cash advances (MCA) or working capital loans. These two can help you when you require liquid capital. Take a look at some of the differences between these two loans to know what is right for you.

Loan vs. Non-Loans

An MCA is technically not considered a loan. Instead, it is the MCA provider buying your future sales. On the other hand, working capital loans are considered traditional loans. When you take out this type of loan, you receive a certain amount of money that you will be repaid in installments. When you receive a merchant cash advance loan, to repay it, the MCA provider will be taking a certain percentage from your credit card sales. This can be done on a daily or weekly basis.


These two types of loans differ in that MCA is based on money your business is yet to earn, while working capital is based on accounts receivable, meaning it is money you have earned but are yet to receive. This makes merchant cash advances riskier because entrepreneurs cannot be sure whether they will manage to bring in enough from credit card transactions to repay the debt.

Annual Percentage Rate (APR)

In the long run, MCAs cost more as they have huge APRs that can go as high as 200%. It is much easier to find working capital with practical APRs.


It is easy for you to qualify for a merchant cash advance loan even with poor credit scores. That is because it is hardly ever tied to credit scores. However, with a working capital loan, you may have to first fix your credit before you can qualify for the loan.

Usage Allowances

Most MCAs do not limit you to how to spend the loan. For working capital, if the money is for equipment financing, then you will have to use it on equipment.

Now that you know the difference between these two, you can choose which is right for your business. You can also get in touch with 18 Sierra Financial for financing needs. We have different financing products that can be tailored to meet the needs of your business. Give us a call today.